Oil prices and emerging market exchange rates

Hacihasanoglu, Erk and Turhan, Ibrahim M. and Soytas, Ugur (2012): Oil prices and emerging market exchange rates. Published in: The Central Bank of the Republic of Turkey Working Papers Series , Vol. 1, No. 12 (January 2012): pp. 1-26.

Abstract

This paper investigates the role of oil prices in explaining the dynamics of selected emerging countries exchange rates. Using daily data series, the study concludes that a rise in oil price is leading to a significant appreciation in emerging economies currencies against the US dollar. In our study, we divide daily returns from 03/01/2003 to 02/06/2010 into 3 subsamples and test the role of oil price changes on exchange rate movements. We employ generalized impulse response functions to trace out the dynamic response of each exchange rate in three different time periods. Our findings suggest that oil price dynamics are changing significantly in the sample period and the relation between oil prices and exchange rates becomes more relevant after the 2008 financial crisis.

• Item Type: MPRA Paper
• Language: English
• Keywords: oil prices; emerging market exchange rates; international financial markets; financial crisis
• Subjects: G - Financial Economics > G1 - General Financial Markets > G15 - International Financial Markets; F - International Economics > F3 - International Finance > F31 - Foreign Exchange; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q4 - Energy > Q43 - Energy and the Macroeconomy; G - Financial Economics > G0 - General > G01 - Financial Crises

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